Types of checks that guarantor lenders do

Guarantor lenders must carry out thorough checks as part of the application process. The checks undertaken involve both the borrower and the guarantor to ensure that both parties can afford to repay the loan amount.

Basic criteria

The lenders we feature typically have basic criteria for applying. This includes being over 18 years of age, living and working in the UK, a working mobile phone and debit account. These questions are covered in the basic online application by asking your date of birth and current residence. A working debit account is important for both parties in order to make repayments although some lenders also allow repayment via cash, cheque or credit card.

Credit checks

This is an essential part of the underwriting process. By the lender running credit checks through credit reference bureaus such as Experian, Equifax or CallCredit, they are able to get an idea of how well both the borrower and the guarantor have repaid other loans in the past. A credit check also allows the lender to see if the customers have any other similar loans open at the moment and this may affect their lending decision. Lenders will tend to favour those guarantors with good credit because it provides security if the main borrower is unable to make repayment. Loan providers prefer those guarantors with mortgages or car loans because they are used to the idea of repaying in monthly instalments and have demonstrated a level of good credit.

Affordability checks

This type of check refers to making sure that the borrower and guarantor can afford repayment. First, the lender needs to assess how much the individual wishes to borrow and how much they can afford to repay based on their financial circumstances. Therefore, a successful affordability check carried out by the lender will involve requesting a pay-slip or bank statement from both parties to confirm their income and then adjusting how much they are allowed to borrow based on this.

Phone calls

A phone call is mandatory for some lenders before providing the funds. Both the borrower and guarantor have a responsibility to ensure that the loan is repaid. Above all, the guarantor has to be aware that they are also responsible for repayment if the main borrower defaults and that there may be added late fees involved. A brief phone call is carried out by most lenders to ensure that all parties are aware of the terms of the agreement.

Electronically signing the agreement

To avoid having to print off a form, sign it, send it off in the post and wait for a response a few days later, many online lenders provide an online loan agreement. This is a lot more convenient for those who are in need of funds and makes the whole process less time consuming. In order to sign the loan agreement, the lender will send an email to the borrower and guarantor with a special link that they must click on to verify. For some lenders, they may ask you to click on the email link and they will also send you an SMS code that you must enter to verify the loan. This means that the lender can confirm your email address and mobile number should they wish to contact you in the future.

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